The Robo-Director

If you haven’t heard, we are officially in the fourth industrial revolution and artificial intelligence is already applied all around us. AI will continually become more prevalent in our daily and business lives – apparently to our benefit.

THE FOURTH INDUSTRIAL REVOLUTION

To understand the fourth industrial revolution there is merit in reflecting on the first three industrial revolutions. During the first industrial revolution water and steam power were used to mechanise production. The second used electric power to create mass production and the third used electronics and information technology to automate production. The fourth industrial revolution is a digital revolution that is characterised by a synthesis of technologies that is blurring the lines between the physical, digital, and biological spheres.

According to Klaus Schwab, Founder and Executive Chairman of the World Economic Forum “The Fourth Industrial Revolution … will change not only what we do but also who we are. It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we devote to work and leisure, and how we develop our careers, cultivate our skills, meet people, and nurture relationships.”

AI IN THE BOARDROOM

The fourth resolution with its fusion of technologies will dramatically affect companies, thus, directors on boards need to consider the associated opportunities and risk.

A startling idea is the concept of the AI director or also called the Robo-Director. It is not a new concept as Deep Knowledge, a Japanese venture capital firm, appointed a robot named VITAL (Validating Investment Tool for Advancing Life Sciences) as a director to the board in 2014 with the specific function to assist in analysing financial and scientific data to better inform investment decisions made by partners and the board of directors.

In a survey of 800 delegates at the 2015 World Economic Forum’s Global Agenda Council in Dalian, China it was believed that the AI directors would be a reality around 2025.

Adriaan Louw and Patrick Bacher of Norton Rose Fulbright are of the opinion that AI is rapidly developing and may in the future get a seat at the boardroom table. Their view is that the ability of AI to fulfil data collection and processing tasks at exponentially speeds compared to its human counterparts means that businesses cannot function properly without the use of AI.

James Matcher of EY is of the view that directors would definitely be able to benefit from the support of AI in terms of analytics and speed, but that Robo-Directors would not become a reality in South Africa in the short term. He added that matters to be considered included the ethics thereof and that there were a lot of discomfort about the point at which machines would be deemed to have become sentient.

COMPANIES ACT

The reason VITAL could be appointed as a director on the Deep Knowledge board is that Hong Kong allows juristic persons to be directors. The same is not the case in South Africa as Section 66 of the Companies 71 of 2008 (Companies Act) states that a juristic person is excluded from serving as a director on the board of a company.

This interpretation assumes that a Robo-Director would be classified as a juristic person, but we should note that should it not be the case that there would technically not be a preclusion for such an appointment.

The fact is directors owe a fiduciary duty to the company. Some writers are of the view that the duty of good faith and acting in the best interest of the company therefore excludes the Robo-Director from being appointed. However, in speaking to coders and futurists they are convinced that one could hardcode “good faith” and “best interest” into AI.

Definitely food for thought.

No one sees Robo-Directors replacing warm bodies on boards in totality, but there is consensus in the proposed value that could be added and it is this type of thinking that could influence the amendment to corporate law.